What is an Up Round?
Unlike public listed companies, private company shares are not traded on a public stock exchange such as the ASX. Increases in company valuation and share price are reflected in ‘up rounds’, where the company revalues itself at a higher amount during a new capital raise. A higher valuation often reflects company growth and the potential for shareholder returns upon an exit opportunity such as an IPO.
Equitise’s Up Rounds
Over the past 12 months, 7 companies that have raised capital on Equitise have come back to raise capital again at a higher valuation: Xinja (+63%), Goodments (+104%), Car Next Door (+102%), GoCatch (+28%), Digital Classifieds Group (+257%), Maker&Son (+76%) and Retirement Income Group (+135%), averaging +109% across the raises. These companies have performed particularly well all having experienced up rounds within a few years of their first raise with Equitise. Furthermore, no company we’ve raised for over the last three years has experienced bankruptcy which is also another measure of success when working with early stage companies. This is a great outcome for the companies and Equitise investors, which shows the focus and effort the Equitise team puts in to sorting and selecting some great companies to raise on the platform.
Two standout CSF up rounds were the social impact investment platform Goodments and the neobank Xinja, gaining 104% and 63% on their valuation respectively after their 2018 raises. Xinja’s 2018 raise was the first retail equity crowdfund in Australia and raised a staggering $2.4 million from 2,768 investors - an amazing feat given equity crowdfunding was largely an unknown investment channel. Xinja went on to raise another $2.6 million with Equitise in 2019. Its share price from round one to two rose from $1.25 to $2.04, reflecting the granting of a full banking licence, rapid customer base growth and a strong outlook.
Equitise’s up rounds haven’t only been limited to CSF, with a number of wholesale raises also experiencing increased valuations. Digital Classifieds Group, a portfolio of online classifieds platforms, completed a raise in 2017 that experienced a 257% up round, increasing their valuation from $7 million to $25 million. Car Next Door raised $770,000 in 2018 from 24 sophisticated investors. The Shark Tank success story then raised another $210,000 on Equitise, having secured $7.7 million from Hyundai and Suncrop to facilitate further growth. It’s valuation increased 102% from $27 million to $55 million.
When do I see money back?
Whilst these up rounds are extremely positive and a good sign that the business is doing well, it may still be some time before investors receive money back. This often comes through an acquisition by another company or an IPO on a stock exchange. So now is the time to keep an eye on the business and maybe an opportunity to invest some more if you think it will continue to do well but as always investing in startups is risky and you shouldn’t invest what you can’t afford to lose.